Stamp duty is prohibiting first time buyers in the UK and should be altered in the Budget later this month, preferably to make sellers pay the tax rather than buyers, a new report suggests.
According to the Yorkshire Building Society report the latest figures show that in 2016 just 26% of first time buyers bought properties worth under the stamp duty threshold of £125,000, down from 47% in 2006.
It says that this means stamp duty was paid by an unprecedented 74% of first time buyers last year, significantly more than the 53% paying the tax 10 years ago.
Along with this the proportion of first time buyers able to find a home under the stamp duty threshold has almost halved in a decade as first time buyers increasingly struggle to find properties under £125,000.
The stamp duty threshold was increased to £125,000 in 2006 to keep pace with house price inflation. The threshold has remained the same since then, despite the fact that the average house price has risen by 35% since 2006, bringing more properties into the stamp duty threshold.
To levy the tax against a similar proportion of first-time buyers who paid the tax in 2006, the government would need to increase the threshold to £175,000. Additionally, average wages have fallen by 1% in real terms over the same period.
Yorkshire Building Society is calling on the Government to reform the tax in this year’s upcoming Budget and points out that making stamp duty a seller’s tax, for example, would eliminate the cost of the tax for first time buyers whilst also helping those moving up the ladder.
It has worked out that if stamp duty was being paid by the property seller, first time buyers could save an average of £3,625, while Londoners could save £13,171. Similarly, those moving up the property ladder could save an average of £4,154 across the UK and £9,762 in London.
‘In its present form, stamp duty does not suit today’s housing market as it pushes up costs for those looking to buy, exacerbating affordability issues in a market where prices have vastly outpaced wage growth,’ said Andrew McPhillips, chief economist of the Yorkshire Building Society.
‘Levying the charge against sellers rather than buyers will help to reduce costs for first-time buyers, helping more people to get on the property ladder. It would also help those moving up the property ladder, enabling them to move to a more suitable property and potentially freeing up smaller homes for first time buyers to purchase,’ he pointed out.
‘Although this would help to alleviate some of the effects of the housing crisis, it does not address the root cause which is the lack of supply. The Government should implement the proposals in their recent White Paper and go further to boost housebuilding so that there are enough properties available for people to buy,’ he added.
Politician John Stevenson MP is a supporter of stamp duty change and is urging the Chancellor Philip Hammond to take action. ‘At present it penalises first time buyers and those aspiring to move up the housing ladder. I have and will continue to make representations to Government regarding such a change appearing in this year’s Budget,’ he said.
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